The Capital Economics China Activity Proxy (CAP) suggests that the economy has continued to accelerate sharply. In fact, we estimate that output is currently expanding at a pace not too far short of the official growth rate of GDP. But with policy support being withdrawn, we do not expect such rapid growth to last. There has long been a large gap between growth as shown by the CAP and that in the GDP figures but it has all but closed recently. We estimate that output increased 6.5% y/y in November, the fastest pace since 2013. Official GDP growth in Q4 is unlikely to be materially different (our forecast is 6.8%). That hasn’t been true since 2011. Of course, the stories that the two sets of figures tell are very different. The official GDP figures point to improbable stability – GDP growth has been flat at 6.7% y/y in each of the past three quarters. The CAP by contrast shows a sharp turnaround from a trough of under 4% growth at the end of last year.
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